BNY Mellon Third Quarter 2014 Financial Highlights

Transcription

1 BNY Mellon Third Quarter 204 Financial Highlights October 7, 204

2 Cautionary Statement A number of statements in our presentations, the accompanying slides and the responses to your questions are forward-looking statements. These statements relate to, among other things, The Bank of New York Mellon Corporation s (the Corporation ) expectations regarding: our estimated capital ratios and expectations regarding those ratios; preliminary business metrics; our plans relating to the securities portfolio and impact on net interest revenue; and statements regarding the Corporation's aspirations, as well as the Corporation s overall plans, strategies, goals, objectives, expectations, estimates, intentions, targets, opportunities and initiatives. These forward-looking statements are based on assumptions that involve risks and uncertainties and that are subject to change based on various important factors (some of which are beyond the Corporation s control). Actual results may differ materially from those expressed or implied as a result of the factors described under Forward Looking Statements and Risk Factors in the Corporation s Annual Report on Form 0-K for the year ended December 3, 203 (the 203 Annual Report ), and in other filings of the Corporation with the Securities and Exchange Commission (the SEC ). Such forward-looking statements speak only as of October 7, 204, and the Corporation undertakes no obligation to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events. Non-GAAP Measures: In this presentation we may discuss some non-gaap adjusted measures in detailing the Corporation s performance. We believe these measures are useful to the investment community in analyzing the financial results and trends of ongoing operations. We believe they facilitate comparisons with prior periods and reflect the principal basis on which our management monitors financial performance. Additional disclosures relating to non-gaap adjusted measures are contained in the Corporation s reports filed with the SEC, including the 203 Annual Report, our Quarterly Report on Form 0-Q for the quarter ended June 30, 204 and the Corporation's Earnings Release for the quarter ended September 30, 204, included as an exhibit to our Current Report on Form 8-K filed on October 7, 204 (the Earnings Release ), available at 2 Third Quarter 204 Financial Highlights

3 Third Quarter 204 Financial Highlights Earnings per share of 0.93 including: 0.29 per common share for previously disclosed gains net of litigation and restructuring charges Investment management and performance fees +7% year-over-year Assets under management (AUM) +7% year-over-year to a record.65 trillion 3 billion of net long-term inflows Investment services fees +5% year-over-year Assets under custody and/or administration (AUC/A) totaled 28.3 trillion, +3% year-over year 529 billion of new AUC/A last twelve months Continued progress on expense control Noninterest expense +7% year-over-year, +% sequentially Non-GAAP 0% year-over-year, +% sequentially Staff expense (3%) year-over-year Return on tangible common equity of 26%; 8% on an adjusted basis Repurchased.0 million common shares for 43 million in third quarter Represents a Non-GAAP measure. See Appendix for reconciliations. Additional disclosures regarding this measure and other Non-GAAP adjusted measures are available in the Corporation s reports filed with the SEC, available at 3 Third Quarter 204 Financial Highlights

4 Third Quarter 204 Key Performance Drivers EPS (Non-GAAP) of 0.64, +5% year-over-year and +3% sequentially, driven by growth in Investment Management and Investment Services fees and continued progress on expense control Investment management and performance fees +7% year-over-year reflecting higher equity markets, currency impact and higher performance fees Investment services fees +5% year-over-year driven by continued growth in Asset servicing, Clearing services and Treasury services fees Market-related revenue impacted by seasonality and macro factors Foreign Exchange - Higher volumes helping to mitigate lower volatility Securities Lending - Seasonal decline sequentially; rate environment continues to compress spreads Net interest revenue/margin - Tactical asset/liability actions and higher balance levels offset by continued low short-term interest rates Provision for credit losses was a credit of 9 million in 3Q4 versus a provision of 2 million in 3Q3 and a credit of 2 million in 2Q4 Noninterest expense (Non-GAAP) flat year-over-year primarily reflecting lower staff expense Effective tax rate of 33.5% in 3Q4. The previously disclosed gains, litigation and restructuring charges increased the effective tax rate 7.% in 3Q4 Represents a Non-GAAP measure. See Appendix for reconciliations. Additional disclosures regarding this measure and other Non-GAAP adjusted measures are available in the Corporation s reports filed with the SEC, available at 4 Third Quarter 204 Financial Highlights

5 Summary Financial Results for the Third Quarter 204 Growth vs. in millions, except per share data 3Q4 2Q4 3Q3 3Q3 2Q4 Revenue 4,6 3,745 3,783 22% 23% Provision for credit losses (9) (2) 2 N/M N/M Expenses 2,968 2,946 2,779 7% % Pre-tax operating margin 36% 22% 26% EPS % N/M Return on Tangible Common Equity 26.2% 4.5% 28.3% Represents a Non-GAAP measure. See Appendix for reconciliation. Additional disclosures regarding this measure and other Non-GAAP adjusted measures are available in the Corporation s reports filed with the SEC, available at NM - Not Meaningful 5 Third Quarter 204 Financial Highlights

6 Summary Financial Results for the Third Quarter 204 (Non-GAAP) Growth vs. in millions, except per share data 3Q4 2Q4 3Q3 3Q3 2Q4 Revenue 3,752 3,728 3,775 ()% % Expenses 2,673 2,640 2,682 % % Operating leverage (27) bps (6) bps EPS - Non-GAAP % 3% Pre-tax operating margin 29% 30% 29% Return on Tangible Common Equity 8.4% 8.4% 2.3% YoY Operating leverage of 245 bps; 83 bps QoQ excluding Investment and other income and Net securities gains Represents a Non-GAAP measure. See Appendix for additional reconciliations. Additional disclosures regarding this measure and other Non-GAAP adjusted measures are available in the Corporation s reports filed with the SEC, available at bps - basis points 6 Third Quarter 204 Financial Highlights

7 Investment Management Metrics Asset Under Management (AUM) in billions 3Q4 LTM 9/30/4 Beginning balance of AUM,636,532 Net inflows (outflows): Long-Term: Equity (2) (2) Fixed income 4 Index (3) Liability-driven investments Alternative investments 5 Total long-term inflows 3 23 Short-term: Cash 9 Total net inflows Net market/currency impact (22) 9 Ending balance of AUM 3,646,646 Wealth Management Growth vs. in millions 3Q4 3Q3 2Q4 Average loans Average deposits 0,772 3,764 4 % ()% Excludes securities lending cash management assets and assets managed in the Investment Services business. 2 Includes currency and overlay assets under management. 3 Preliminary. LTM - Last Twelve Months 7 Third Quarter 204 Financial Highlights 4% 2%

8 Investment Services Metrics Asset under custody /administration at period end (trillions),2 Growth vs. 3Q4 3Q3 2Q % ()% Market value of securities on loan at period end (billions) % % Average loans (millions) Average deposits (millions) 33,785 22,734 2 % 8 % 2 % % Broker-Dealer Average tri-party repo balances (billions) 2,063 6 % 2 % Clearing Services Global DARTS volume (thousands) Average active clearing accounts (U.S. platform) (thousands) Average long-term mutual fund assets (U.S. platform) (millions) 209 5, ,827 ()% 3 % 7 % % % 2 % Depositary Receipts Number of sponsored programs,302 (4)% ()% Includes the AUC/A of CIBC Mellon of.2 trillion at Sept. 30, 203, June 30, 204 and Sept. 30, Preliminary. 3 Represents the total amount of securities on loan managed by the Investment Services business. Excludes securities for which BNY Mellon acts as agent, beginning in the fourth quarter of 203, on behalf of CIBC Mellon clients, which totaled 62 billion at Dec. 3, 203, 66 billion at March 3, 204, 64 billion at June 30, 204 and 65 billion at Sept. 30, Third Quarter 204 Financial Highlights

9 Fee and Other Revenue ( in millions) 3Q4 Asset servicing,025 Clearing services 337 Issuer services 35 Treasury services 42 Total investment services fees,89 Investment management and performance fees 88 Growth vs. 3Q3 2Q4 6% % 7 3 (2) Asset Servicing Drivers YoY: Organic growth, higher market values, net new business and higher collateral management fees QoQ: Organic growth and seasonally lower securities lending revenue Clearing Services YoY: Higher clearing accounts, higher mutual fund positions and higher asset levels QoQ: Higher clearing accounts, higher mutual fund positions, higher asset levels and higher DARTS volume Issuer Services Foreign exchange and other trading revenue 53 (4) 8 Distribution and servicing Financing-related fees 44 Investment and other income 890 N/M N/M Total fee revenue 3, Net securities gains 20 N/M N/M YoY: Lower Corporate Trust fees QoQ: Seasonally higher Depositary Receipt fees Treasury Services Higher payment volumes Investment Management and Performance Fees YoY: Higher equity markets, currency impact and higher performance fees QoQ: Higher equity markets, currency impact and seasonally lower performance fees Foreign Exchange & Other Trading Revenue Total fee and other revenue - GAAP 3,85 29% 29% YoY: Higher FX volumes and lower volatility QoQ: Higher FX volumes Asset servicing fees include securities lending revenue of 35 million in 3Q3, 46 million in 2Q4 and 37 million in 3Q4. NM - Not Meaningful 9 Third Quarter 204 Financial Highlights

10 Net Interest Revenue ( in millions) 3Q4 Net interest revenue (non-fte) 72 Growth vs. 3Q3 2Q4 (7)% % Net Interest Revenue Drivers Net interest revenue (FTE) - Non-GAAP 736 Net interest margin (FTE) 0.94% (6) (22) bps (4) bps YoY: Lower asset yields, lower accretion and higher average interest-earning assets driven by higher deposits Selected Average Balances: Cash/interbank investments 39,278 Trading account securities 5, % (2) ()% (2) QoQ: Higher interest-earnings deposits and lower asset yields Euro-denominated deposit liabilities comprised 5% of average deposits in 3Q4 and 6% in 2Q4 Securities 2,055 0 Loans 54, Interest-earning assets 3,603 Interest-bearing deposits 64,233 Noninterest-bearing deposits 82, bps basis points FTE fully taxable equivalent 0 Third Quarter 204 Financial Highlights

11 Noninterest Expense Growth vs. Drivers ( in millions) 3Q4 3Q3 2Q4 Staff,477 (3)% 3% Professional, legal and other purchased services YoY: Lower pension, benefits of technology insourcing, Software and equipment () streamlining actions, lower business development, annual merit increase and higher professional, legal Net occupancy 54 and other purchased services Distribution and servicing 07 () (4) Sub-custodian 67 (6) (7) QoQ: Higher incentives due to 2Q4 adjustment Business development 6 (3) (0) related to previously disclosed charge, annual merit Other 250 (28) increase, higher professional, legal and other Amortization of intangible assets 75 (7) purchased services, lower sub-custody and business development expenses and streamlining actions M&I, litigation and restructuring charges 220 N/M N/M Total noninterest expense GAAP 2,968 7 % % Total noninterest expense excluding amortization of intangible assets, M&I, litigation and restructuring charges and the charge related to investment management funds, net of incentives Non-GAAP 2,673 % % Full-time employees 50, (200) Represents a Non-GAAP measure. See Appendix for reconciliation. Additional disclosures regarding this measure and other Non-GAAP adjusted measures are available in the Corporation s reports filed with the SEC, available at NM - Not Meaningful Third Quarter 204 Financial Highlights

12 Capital Ratios Regulatory capital ratios:,2,3 9/30/4 6/30/4 9/30/3 Highlights Capital ratios remain strong CET ratio.4%.4% Tier capital ratio Total (Tier plus Tier 2) capital ratio Leverage capital ratio Selected regulatory capital ratios - fully phasedin - Non-GAAP:,2,4 4.2% 4 Sept. YTD '4: Generated.9 billion of net Tier 5.8 common 6.8 In 3Q4, purchased million common shares for 43 million; 35 million shares for.2 billion 5.6 YTD Declared a quarterly dividend of 0.7 per common share Estimated CET: Standardized approach 0.8% 0.3% 0.% Advanced approach Estimated Supplementary leverage ratio ("SLR") 5 4.6% 4.7% N/A * Footnotes through 5 provided in the Appendix. e Append N/A (Not available) 2 Third Quarter 204 Financial Highlights

13 Investment Management Growth vs.. Drivers ( in millions) 3Q4 3Q3 2Q4 Investment management and performance fees 877 8% % Investment management fees Distribution and servicing 4 Other 6 N/M N/M YoY & QoQ: Higher equity markets and currency impact Net interest revenue Performance fees Total Revenue,003 6% (3)% YoY +0MM: Strong performance of liability-driven investments Noninterest expense (ex. amortization of intangible QoQ (7MM): Seasonality assets and the charge related to investment management funds, net of incentives) 727 6% Other revenue % Income before taxes (ex. amortization of intangible Declined (0MM) YoY; (32MM) QoQ primarily reflecting lower assets and the charge related to investment seed capital gains management funds, net of incentives) 276 6% ()% Net interest revenue Pre-tax operating margin 24% 76 bps N/M Adjusted pre-tax operating margin 2 33% (36) bps (267) bps YoY & QoQ: Higher average loans and impact of changing average deposit levels Assets Under Management 3 (in billions),646 7% % Memo: Noninterest expense Assets Under Management net inflows 32 YoY: Currency impact and business development expenses Net long-term inflows 3 related to strategic initiatives Net short-term inflows 9 Total fee and other revenue includes the impact of the consolidated investment management funds. Additionally, other revenue includes asset servicing, treasury services, foreign exchange and other trading revenue and investment and other income 2 Excludes the net negative impact of money market fee waivers, amortization of intangible assets and the charge related to investment management funds net of incentives, and is net of distribution and servicing expense. Represents a Non-GAAP measure. See Appendix for reconciliation. Additional disclosures regarding this measure and other Non-GAAP adjusted measures are available in the Corporation s reports filed with the SEC, available at 3 Preliminary. NM - Not Meaningful bps basis points 3 Third Quarter 204 Financial Highlights

14 Investment Services Growth vs. Drivers ( in millions) 3Q4 3Q3 2Q4 Investment services fees: Asset Servicing YoY: Organic growth, higher market values, net new business and Asset servicing % % higher collateral management fees Clearing services QoQ: Organic growth and seasonally lower securities lending revenue Issuer services 34 (2) 36 Clearing Services Treasury services 39 3 () YoY: Higher clearing accounts, higher mutual fund positions and higher asset levels Total investment services fees, QoQ: Higher clearing accounts, higher mutual fund positions, higher asset levels and higher DARTS volume Foreign exchange and other trading revenue 59 (0) 0 Other 59 (6) (32) Issuer Services YoY: Lower Corporate Trust fees Net interest revenue 583 (6) (2) QoQ: Seasonally higher Depositary Receipt fees Total revenue 2,588 % 3 % Treasury Services Higher payment volumes Noninterest expense (ex. amortization of,835 4 % % intangible assets) Foreign exchange and other trading YoY: Higher FX volumes and lower volatility Income before taxes (ex. amortization of 753 (6)% 9 % QoQ: Higher FX volumes intangible assets) Pre-tax operating margin 27% (208) bps 73 bps Net interest revenue YoY: and QoQ: Higher deposits and loans, lower yield and lower Pre-tax operating margin (ex. amortization of intangible accretion 29% (27) bps 68 bps assets) Noninterest expense Investment services fees as a percentage of YoY: Higher litigation, higher professional, legal and other noninterest expense 2 00% 279 bps 752 bps purchased services and lower staff QoQ: Higher litigation, lower sub-custody and lower staff AUC/A at period end 3 (in trillions) % ()% Total fee and other revenue includes investment management fees and distribution and servicing revenue 2 Noninterest expense excludes amortization of intangible assets and litigation expense. 3 Preliminary. bps basis points 4 Third Quarter 204 Financial Highlights

15 APPENDIX

16 6 Third Quarter 204 Financial Highlights. Expense & Pre-Tax Operating Margin - Non-GAAP Reconciliation ( in millions) 3Q4 2Q4 3Q3 Total revenue GAAP 4,6 3,745 3,783 Less: Net income attributable to noncontrolling interests of consolidated investment management funds Gain on the sale of investment in Wing Hang 490 Gain on the sale of One Wall Street building 346 Total revenue, as adjusted Non-GAAP 3,752 3,728 3,775 Total noninterest expense GAAP Less: Amortization of intangible assets M&I, litigation and restructuring charges Charge related to investment management funds, net of incentives 2, , , Total noninterest expense excluding amortization of intangible assets, M&I, litigation and restructuring charges and the charge related to investment management funds, net of incentives Non-GAAP 2 2,673 2,640 2,682 Provision for credit losses (9) (2) 2 Income before income taxes, as adjusted Non-GAAP 2,098,00,09 Pre-tax operating margin Non-GAAP,2 29% 30% 29% Income before taxes divided by total revenue. 2 Non-GAAP excludes M&I, litigation and restructuring charges, the gain on the sale of our investment in Wing Hang, the gain on the sale of the One Wall Street building, a charge related to investment management funds, net of incentives and net income attributable to noncontrolling interests of consolidated investment management funds, if applicable.

17 Return on Tangible Common Equity Reconciliation ( in millions) 3Q4 2Q4 3Q3 Net income applicable to common shareholders of The Bank of New York Mellon Corporation GAAP, Add: Amortization of intangible assets, net of tax Net income applicable to common shareholders of The Bank of New York Mellon Corporation excluding amortization of intangible assets Non-GAAP Less: Gain on the sale of investment in Wing Hang Gain on the sale of the One Wall Street building 204 Add: M&I, litigation and restructuring charges Benefit related to the disallowance of certain foreign tax credits (26) Charge related to investment management funds, net of incentives 85 Net income applicable to common shareholders of The Bank of New York Mellon Corporation, as adjusted Non-GAAP , ,04 Average common shareholders equity 36,75 36,565 34,264 Less: Average goodwill 8,09 8,49 7,975 Average intangible Assets 4,274 4,354 4,569 Add: Deferred tax liability tax deductible goodwill,37,338,262 Deferred tax liability intangible assets,230,247,242 Average tangible common shareholders equity 6,95 6,647 4,224 Return on tangible common equity Non-GAAP 2,3 26.2% 4.5% 28.3% Return on tangible common equity Non-GAAP adjusted 2,3 8.4% 8.4% 2.3% Deferred tax liabilities are based on fully phased-in Basel III rules. The first and second quarters of 204 include deferred tax liabilities on tax deductible intangible assets permitted under Basel III rules. 2 Non-GAAP excludes M&I, litigation and restructuring charges, the gain on the sale of our investment in Wing Hang, the gain on the sale of the One Wall Street building, a charge related to investment management funds, net of incentives and the benefit related to the disallowance of certain foreign tax credits, if applicable. 3 Annualized. 7 Third. Quarter 204 Financial Highlights

18 Earnings Per Share Reconciliation Growth vs. ( in dollars) 3Q4 2Q4 3Q3 3Q3 2Q4 GAAP results Add: Charge related to investment management funds, net of incentives 0.07 Litigation and restructuring charges Benefit related to the disallowance of certain foreign tax credits (0.22) Less: Gain on the sale of investment in Wing Hang Bank Limited 0.27 Gain on the sale of One Wall Street building 0.8 Non-GAAP results % 3% Does not foot due to rounding. 8 Third Quarter 204 Financial Highlights

19 Revenue (ex. investment and other income & net securities gains) ( in millions) 3Q4 3Q3 2Q4 Asset servicing, ,022 Clearing services Issuer services Treasury services Total investment services fees,89,738,720 Investment management and performance fees Foreign exchange and other trading revenue Distribution and servicing Financing-related fees Investment and other income Total fee revenue 3,83 2,957 2,962 ( in millions) Total revenue - GAAP Less: 3Q4 3Q3 2Q4 4,6 3,783 3,745 Investment and other income Net securities gains Add: Net income attributable to noncontrolling interests related to consolidated investment management funds Revenue (excluding investment and other income and net securities gains) (23) 3,678 (8) 3,602 (7) 3,568 Net securities gains Total fee and other revenue - GAAP 3,85 2,979 2,980 Income from consolidated investment management funds Net interest revenue Total revenue - GAAP 4,6 3,783 3,745 Asset servicing fees include securities lending revenue of 35 million in 3Q3, 46 million in 2Q4 and 37 million in 3Q4. 9 Third Quarter 204 Financial Highlights

20 Operating leverage (ex. investment and other income & net securities gains) Growth vs. ( in dollars) 3Q4 2Q4 3Q3 3Q3 2Q4 Revenue (excluding investment and other income and net securities gains) 3,678 3,568 3,602 2 % 3% Total noninterest expense excluding amortization of intangible assets, M&I, litigation and restructuring charges and the charge related to investment management funds, net of incentives Non-GAAP 2,673 2,640 2,682 % % Operating leverage (excluding investment and other income and net securities gains) 245 bps 83 bps Non-GAAP excludes M&I, litigation and restructuring charges, the gain on the sale of our investment in Wing Hang, the gain on the sale of the One Wall Street building, a charge related to investment management funds, net of incentives and net income attributable to noncontrolling interests of consolidated investment management funds, if applicable. bps basis points 20 Third Quarter 204 Financial Highlights

21 Capital Ratio Footnotes Sept. 30, 204 regulatory capital ratios are preliminary. Please reference slides 22 and 23. See the Capital Ratios section in the Earnings Release for additional detail. 2 Beginning with June 30, 204, risk-based capital ratios include the net impact of including the total consolidated assets of certain consolidated investment management funds in risk-weighted assets. These assets were not included in prior periods. The leverage ratio was not affected. 3 The Collins Floor comparison of the CET, Tier and Total risk-based regulatory capital ratios which is calculated based on Basel III components of capital, as phased-in, and asset risk-weightings using the general risk-based guidelines included in the final rules released by the Board of Governors of the Federal Reserve System (the Federal Reserve ) on July 2, 203 (the Final Capital Rules ) (which for 204 look to Basel I-based requirements) were 4.3%, 5.5% and 6.2%, respectively, at June 30, 204 and 5.%, 6.3% and 7.0%, respectively, at Sept. 30, Please reference slides 22 and 23. See the Capital Ratios section in the Earnings Release for additional detail. 5 The estimated fully phased-in SLR as of June 30, 204 is based on our interpretation of the Final Capital Rules, as supplemented by the Notice of Proposed Rulemaking released in April 204 concerning the SLR, except that offbalance sheet exposures included in total leverage exposure reflect the end of period measures, rather than a daily average. The estimated fully phased-in SLR as of Sept. 30, 204 is based on our interpretation of the Final Capital Rules, as supplemented by the Federal Reserve s final rules on the SLR. On a fully phased-in basis, we expect to satisfy a minimum SLR of over 5%, 3% attributable to a regulatory minimum SLR, and greater than 2% attributable to a buffer applicable to U.S. G-SIBs. t 2 Third Quarter 204 Financial Highlights

22 Estimated Fully Phased-In Basel III CET Ratio - Non-GAAP ( in millions) 9/30/4 6/30/4 9/30/3 Total Tier capital 2,09 20,669 8,074 Adjustments to determine estimated fully phased-in Basel III CET: Deferred tax liability tax deductible intangible assets 82 Intangible deduction (2,388) (2,453) Preferred stock (,562) (,562) (,562) Trust preferred securities (62) (7) (324) Other comprehensive income (loss) and net pension fund assets: Securities available-for-sale Pension liabilities (675) (69) (,348) Net pension fund assets (279) Total other comprehensive income (loss) and net pension fund assets (97) (05) (,40) Equity method investments (92) (99) (479) Deferred tax assets (26) Other 2 (2) 8 Total estimated fully phased-in Basel III CET 6,720 6,277 4,643 Under the Standardized Approach: Estimated fully phased-in Basel III risk-weighted assets 54,298 58,68 45,589 Estimated fully phased-in Basel III CET ratio Non-GAAP 2 0.8% 0.3% 0.% Under the Advanced Approach: Estimated fully phased-in Basel III risk-weighted assets 67,933 62,072 3,583 Estimated fully phased-in Basel III CET ratio Non-GAAP 2 0.0% 0.0%.% Sept. 30, 204 information is preliminary. 2 Beginning with June 30, 204, risk-based capital ratios include the net impact of including the total consolidated assets of certain consolidated investment management funds in risk-weighted assets. These assets were not included in prior periods. 22 Third Quarter 204 Financial Highlights

23 Basel I CET Ratio & Estimated SLR - Non-GAAP Reconciliation Basel I CET ratio ( in millions) 9/30/3 Total Tier capital Basel I 8,074 Less: Trust preferred securities 324 Preferred stock,562 Total CET Basel I 6,88 Total risk-weighted assets Basel I 4,404 Basel I CET ratio Non-GAAP 4.2% Estimated SLR - Non-GAAP ( in millions) Total CET - fully phased-in Additional Tier capital 6/30/4 9/30/4 6,277,562 6,720 Total Tier capital 7,839 8,280 Total leverage exposure: Quarterly average total assets 369,22 380,409 Less: Amounts deducted from Tier capital 20,480 20,66 Total on-balance sheet assets, as adjusted 348, ,243 Off-balance sheet exposures: Potential future exposure for derivatives contracts (plus certain other items),5,694 Repo-style transaction exposures included in SLR Credit-equivalent amount other off-balance sheet exposures (less SLR exclusions) 22,658 2,924 Total off-balance sheet exposures 33,773 33,68 Total leverage exposure 382, ,86 Estimated SLR 4.7% 4.6%,560 The estimated fully phased-in SLR as of June 30, 204 is based on our interpretation of the Final Capital Rules, as supplemented by the Notice of Proposed Rulemaking released in April 204 concerning the SLR, except that off-balance sheet exposures included in total leverage exposure reflect the end of period measures, rather than a daily average. The estimated fully phased-in SLR as of Sept. 30, 204 is based on our interpretation of the Final Capital Rules, as supplemented by the Federal Reserve s final rules on the SLR. On a fully phased-in basis, we expect to satisfy a minimum SLR of over 5%, 3% attributable to a regulatory minimum SLR, and greater than 2% attributable to a buffer applicable to U.S. G-SIBs. 23 Third Quarter 204 Financial Highlights

24 Pre-Tax Operating Margin Investment Management Reconciliation 3Q4 2Q4 3Q3 ( in millions) Income before income taxes GAAP Add: Amortization of intangible assets Money market fee waivers Charge related to investment management funds, net of incentives Income before income taxes excluding amortization of intangible assets, money market fee waivers and the charge related to investment management funds, net of incentives Non-GAAP Total revenue GAAP Less: Distribution and servicing expense Money market fee waivers benefiting distribution and servicing expense Add: Money market fee waivers impacting total revenue, , Total revenue net of distribution and servicing expense and excluding money market fee waivers - Non- GAAP Pre-tax operating margin 24% 6% 24% Pre-tax operating margin excluding amortization of intangible assets, money market fee waivers, the charge related to investment management funds, net of incentives and net of distribution and servicing expense Non-GAAP 33% 36% 33% Income before taxes divided by total revenue.. 24 Third Quarter 204 Financial Highlights